A O SMITH CORP (AOS)
Sector: Industrials
2026 Annual Meeting Analysis
A O SMITH CORP · Meeting: April 13, 2026
Directors FOR
5
Directors AGAINST
5
Say on Pay
FOR
Auditor
FOR
Director Elections
Election of Directors
Against Analysis
Ms. Holt has served since 2021, meaning her tenure fully covers the three-year period during which AOS stock returned only +5.5% while the sector benchmark XLI returned +78.0%, a gap of -72.5 percentage points that far exceeds the 50-point threshold applicable to low-positive TSR companies; the five-year track record (+6.6% for AOS vs. strong XLI gains) does not cure the trigger, so a vote against is warranted.
Dr. Kadri has served since 2016 and her tenure fully overlaps the period during which AOS underperformed XLI by -72.5 percentage points over three years, well beyond the 50-point threshold; the five-year record does not improve the picture sufficiently to override the trigger, so a vote against is warranted.
Mr. Larsen has served since 2021, fully covering the three-year underperformance period where AOS returned +5.5% versus XLI's +78.0%, a -72.5 percentage point gap that exceeds the 50-point threshold; the five-year record does not rescue the vote, and a vote against is warranted.
Under policy, executive directors including the CEO are subject to the same TSR trigger as independent directors; while Mr. Shafer joined the board in 2025 (within 24 months), he has been an executive officer of AOS since March 2024 and has material overlap with the underperformance period during which AOS trailed XLI by -72.5 percentage points; the 24-month board exemption applies to board tenure but the policy notes executive directors are subject to the trigger, and his executive influence over company performance during the underperformance window supports applying the trigger.
Mr. Wheeler has served as a director since 2017 and was CEO of AOS through June 2025, meaning his tenure as both director and chief executive fully overlaps the three-year period during which AOS returned +5.5% versus XLI's +78.0%, a -72.5 percentage point gap exceeding the 50-point threshold; the five-year record does not cure the trigger, and a vote against is warranted independently of the Say on Pay analysis.
For Analysis
Director since 2024, which is within the 24-month exemption window, so the TSR underperformance trigger does not apply; he has relevant financial expertise as CFO of Owens Corning and qualifies as an audit committee financial expert.
Director since 2023, which is more than 24 months ago but less than three full years; his tenure covers less than half of the three-year underperformance measurement period, and under the policy's proportional treatment for directors serving less than a full three-year overlap, a vote against is not automatically warranted; he brings strong industrial manufacturing and public company leadership experience.
Director since 2024, which is within the 24-month exemption window, so the TSR underperformance trigger does not apply; she has extensive CFO-level financial expertise and qualifies as an audit committee financial expert.
New director nominee first joining in 2026, well within the 24-month exemption; he brings relevant CEO-level experience at a publicly traded manufacturing and technology company.
Although Mr. Smith has served since 2001 and the TSR trigger technically fires based on his long tenure, the policy flags familial relationship to senior management only as a concern where the director is related to the CEO or founder in a direct oversight capacity; Mr. Smith represents the Smith Family Voting Trust (the controlling shareholder), is classified as independent under NYSE rules, serves on no audit committee, and his interests are aligned with all shareholders as a beneficial owner of significant equity; no overboarding, attendance, or other triggers apply.
The AOS board has severely underperformed the XLI industrial sector benchmark over the past three years (+5.5% vs +78.0%, a -72.5pp gap that exceeds the 50pp policy threshold for low-positive TSR companies). Directors with tenures fully overlapping this period — Holt (2021), Kadri (2016), Larsen (2021), Wheeler (2017), and Shafer (executive since 2024) — receive AGAINST votes. New directors Fister, Martin, and Saak are exempt due to recent tenure. Mapes (2023) receives the benefit of proportional treatment given less than full three-year overlap. Mark Smith votes FOR given his role as controlling shareholder representative with aligned economic interests.
Say on Pay
✓ FORCEO
Stephen M. Shafer
Total Comp
$4,960,450
Prior Support
94%%
The CEO's total reported compensation of $4,960,450 is within a reasonable range for a newly appointed CEO at a $9.1B industrial company, and prior Say on Pay support was a strong 94% in 2025 — well above the 70% threshold requiring a response. The pay structure is heavily variable (approximately 85% of CEO target compensation is at risk through annual bonuses and long-term incentives), which satisfies the policy's requirement that at least 50-60% of pay be performance-based. Although AOS stock has significantly underperformed XLI over three years, the variable pay is benchmarked at or near market median (85-109% of median) rather than materially above it, so the pay-for-performance alignment check does not trigger a negative vote under the policy framework.
Auditor Ratification
✓ FORAuditor
Ernst & Young LLP
Tenure
N/A
Audit Fees
$2,461,000
Non-Audit Fees
$104,000
Non-audit fees (audit-related fees of $17,000 plus tax fees of $87,000 = $104,000) represent approximately 4.2% of audit fees of $2,461,000, which is well below the 50% threshold that would raise independence concerns; auditor tenure is not disclosed in the filing so the tenure trigger cannot fire; EY is a Big 4 firm appropriate for a $9.1B market cap company; no material restatements are noted.
Overall Assessment
The 2026 AOS annual meeting features three standard proposals: director elections, Say on Pay, and auditor ratification. The primary governance concern is severe stock underperformance — AOS returned only +5.5% over three years while the XLI sector benchmark returned +78.0%, a -72.5 percentage point gap — which triggers AGAINST votes for five of the ten director nominees (Holt, Kadri, Larsen, Wheeler, and Shafer) whose tenures meaningfully overlap the underperformance period, while Say on Pay and auditor ratification both pass policy screens and receive FOR votes.